President Lagarde takes the stand

The USD slid back to its lowest levels in almost eight months as fresh bout of weak data from the US alongside less hawkish remarks by Fed policy makers kept the greenback suppressed on hopes for a less aggressive monetary policy tightening going forward. Gold continues to push higher on the back of weaker dollar. The precious has been on an impressive rally lately and earlier today it managed to reclaim the $1930 level, which serves as a nine-month high. Last week the final CPI rate for Eurozone confirmed the slowdown of inflation in the month of December to 9.2%, which constitutes as favorable news in the eyes of the central bank but nonetheless the rate hovers more than four times above the 2% target level set by ECB. Economists and analysts see the central bank raising by 50 basis points in the February meeting, followed by another 50 basis points in March and possibly another 25 basis points in May reaching their projected terminal rate of 3.25%.

Later today, the head of the ECB, President Lagarde, is scheduled to deliver a speech and the markets will tune in, seeking for any clues in regards to the central bank’s monetary tightening plans. On Friday, Fed Governor Waller commented in a recent speech that he favors 25 basis points rate hike in the February meeting as inflation data pointed cooled further in December., yet the policy maker underlined that there is more work to do to get rates at a sufficiently restrictive level. The projected terminal rate north of 5.1% is expected to slow the economy but the central bank runs the risk of doing excessive damage.

USD/JPY continues to trade in a sideways manner between 128.60 (S1) and 131.00 (R1) levels. We hold a sideways bias for the pair yet we note that the RSI indicator perked up in today’s session and could foretell slight bullish tendencies in favor of the pair. Should the bulls take over, we may see the pair breaking the 131.00 (R1) resistance line and head to the 132.80 (R2) level. Should the bears be in charge we may see USD/JPY breaking the 128.60 (S1) support line and aim for the 126.50 (S2) support level.

AUD/USD bounced off the 0.6888 (S1) level and aims for the 0.7043(R1) level. We hold a sideways bias for the pair yet we note the might be some bullish sentiment in its favor according to the RSI indicator. Should the bears take over, we may see the return to the 0.6880 (S1) support line. Should the bulls be in charge we may see AUD/USD breaking the 0.7043 (R1) line and aim for the 0.7124 (R2) resistance level.

Other highlights for the day:

Today in the American session, we note the release of Eurozone’s preliminary consumer confidence for January while on the monetary front ECB Board Member Panetta is scheduled to speak. During tomorrow’s Asian session, we note the release of Australia’s and Japan’s preliminary PMI figures for January and later on Australia’s, NAB business conditions and business confidence for December.

As for the rest of the week:

On Tuesday, we note the release of the preliminary PMI figures for January of France, Germany, Eurozone, the UK and the US, while we also get Germany’s GfK Consumer Confidence for February, UK’s CBI trends for industrial orders and New Zealand’s CPI rates for Q4. On Wednesday, we get Australia’s CPI rates for Q4 and Germany’s Ifo indicators for January, while on the monetary front, we note the release of BoC’s interest rate decision. On Thursday we get UK’s CBI distributive trades for January and from the US the durable goods orders for December, the weekly initial jobless claims figure and we highlight the highlight of the week, namely the US GDP advance rate for Q4.  Finally on Friday, we get from Japan Tokyo’s CPI rates for January and from the US the consumption rate for December and the final University of Michigan consumer sentiment for January.   

USD/JPY H4 Chart

Support: 128.60 (S1), 126.60 (S2), 124.75 (S3)

Resistance: 131.00 (R1), 132.80 (R2), 134.80 (R3)

AUD/USD H4 Chart

Support: 0.6880 (S1), 0.6800 (S2), 0.6720 (S3)

Resistance: 0.7043 (R1), 0.7125 (R2), 0.7200 (R3)

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